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Suppose a mid-sized regional bank has $1 million dollars which it is considering investing either in 30 year zero coupon Treasury bonds or in a jumbo 30 year fixed rate residential mortgage with fixed monthly payments of $5650.Assume that the treasury bonds are currently priced to yield 4% if held until maturity. Assume that the bank requires a premium of 150 basis points in the mortgage`s annualized yield over treasury bond yields before it will lend in the residential mortgage market.
A) Write down the present value equations that the bank would use to determined the annualized percentage rate of return on the residential mortgage. (Wherever possible, plug data from the above problem into the equations.
B) How will the bank use the information on the annualized percentage rate of mortgage obtained in part (a) when deciding whether to invest in T-Bonds or whether to make the residential mortgage?
business economics assignmentquestion 1explain with numeral example that marginal revenue is always lower than the
Discuss and explain one factor of how government involvement in marketplace can impact or not impact the economy. Give a real life example of this factor at work.
how the Principle of Opportunity Cost applies to your life. Think of a recent decision you made. It could be a decision as simple as whether to eat out or cook your own dinner, or it could be a decision to quit your job and go back to school.
Customers to Live Theaters, Inc. can be divided into two groups: seniors and everyone else. The inverse demand curves for each of the two groups are given below. The marginal cost (which equals the average variable cost) of serving an additional p..
Suppose that Marie’s marginal utility from consuming one more unit of bubble gum is 10 utils while her total utility from consuming one more unit of cake increases from 130 utils to 142 utils.
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Based on the Solow model, how would each of the following affect consumption per employee in the long run? Describe and illustrate your answer graphically.
businesses large and small now compete in a truly global economy. to be successful in another country it is essential
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The weak preference relations of Bob and Carol can be represented by real valued utility functions
Choose a product and state whether it has price elasticity or price inelasticity. The beginning value for year 2008 is $43,050, year 2007 starting price was $41,450, and year 2006 beginning price was $42,700.
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